DEPUTY SECRETARY STEINBERG: Well, thank you, Ken, for that kind introduction. It is always good to be back at Brookings and there are so many familiar faces and good friends here. It’s a pleasure to be back. It always feels like you never quite went away.

And you especially feel that, of course, because I have the honor and pleasure of having so many of my former Brookings colleagues being my current colleagues now in government, including the former leader here of the Thornton Center, Jeff Bader, who is doing such an extraordinary job for President Obama over at the White House and so many other colleagues. And so it’s nice to see both the former administration officials who are populating Brookings and vice versa.

And I’m particularly grateful to have a chance to talk about the issues that you raise, Ken, because I think your observations are quite right. I think the big change in our relationship has been the centrality of these global issues. And answering the questions that you put really, I think, are essential to understanding both where we are and potentially where we can go in this bilateral relationship which has such enormous consequences not only for the people of the United States and China, but for the world, given the central role that both of our countries play in both being part of the problem and part of the solution on so many of these issues like the economy, climate and the like.

I want to also express appreciation to my good friend, former colleague Richard Bush at CNAPS. I’m glad to see CNAPS continues to thrive. It’s something that I take a great deal of interest in. It has made a great contribution over the years under Richard’s extraordinary leadership. So I’m glad to see things remain in very good hands here.

I think it’s important to begin this discussion of our collaboration on global issues by reiterating the basic approach and sort of precepts under which President Obama has led our engagement with China. And as he said, we welcome a China that is strong, prosperous, and a successful member of the international community. Now is the time for our two great nations to join hands and commit to creating a prosperous future for our children. It’s a commitment, a very forward-looking and very positive commitment, which reflects the fact that we need to understand our bilateral relationship in a broader context.

This really goes to a point that Secretary Clinton made in a speech she gave to the Council on Foreign Relations last year, which is that given the nature of these challenges we face and the changed global agenda, we face a world in which the central problem of our time is how to generate effective collective action to deal with the problems that no country on its own, no matter how powerful, can solve. And I think this is an insight that both the United States and China share at the core of our effort to deal with these global problems.

So for us, the great challenge is to build these structures of cooperation which includes building on a multilateral basis institutions and mechanisms of cooperation for the 21st century, but also to undergird that with strong bilateral relationships with key players, beginning with our traditional allies, of course, but then also to the emerging powers. Not just China, but also India, Brazil, Turkey, Indonesia, South Africa and the like – all the countries which play an increasingly systemic role in dealing with the big global challenges of our time.

And I think, although the press tends to focus on the day-to-day ups and downs of our bilateral relationship with China, and from time to time proclaims near or imminent or virtual crises in that relationship, I think it’s fair to say that if you look back over the last 18 months, this has been a very strong and productive period in U.S.-China relations. It has demonstrated that the two countries, our two countries, are able to work together effectively to deal with these big structural challenges of our time.

This is not to say that everything is always perfectly smooth sailing. I don’t think any of us who have dealt with U.S.-China relations would ever expect this to be without its difficulties or the cooperation would be automatic, but I think we’ve demonstrated over time that where there are difficulties, we can work through them, and that when there are differences or disagreements either of goals, but more typically among means, that we can work through them through dialogue by building trust and trying to find common ground, by recognizing that on most of these big issues, the core objectives, the core interests are common between our two countries. And that while we may have differences about the best means to achieve them, that strong conviction about the common goal gives us a framework within which to work through these differences. And I’ll talk through a number of those issues in just a moment.

So I think if you looked at our strategy going forward, it has been to build a strong and comprehensive relationship that deals with the full range of issues. We don’t have the luxury of just narrowing it down to a handful, but to build a relationship of trust across a broad range of issues which then gives us a context in which to solve individual sets of issues that we face. And I think it’s particularly timely to look at some of these areas of cooperation because we in our Administration – and I’m pretty confident our counterparts in China – are right now very focused on working towards the second Strategic and Economic Dialogue which will take place in Beijing in just a few weeks under the leadership on our side of Secretaries Clinton and Geithner.

When we think about some of the areas of cooperation, some of the areas that Ken identified, on her first trip to China which is now almost a year and a half ago, Secretary Clinton highlighted three areas which she anticipated at the outset of her time as Secretary of State where there was great opportunity for increased collaboration. The first was international and regional security issues, especially Iran and North Korea. The second was clean energy and climate. And the third was the response to what was already then clear, substantial global economic crisis, and building a new foundation for balanced and sustainable growth. And I think on all three of those, they have proved to be the core issues of our relationship. I think we can see that we have made important progress on all three of them, and that’s what I’m going to spend the remainder of my time talking about today.

On security issues, something clearly we at the State Department are very focused on, I think you can see that there are a number of areas where we have made significant progress, beginning with global security challenges like counterterrorism and counter-piracy, the attempt to build a more sustained military-to-military relationship, and most urgently, and the one that captures the headlines, dealing with Iran and North Korea.

I think if you look at issues like counter-piracy, for example, the deepened engagement in China in supporting global efforts to deal with this common scourge really demonstrates the degree to which China increasingly sees its part of having to do its share and be part of the global solutions and wanting to work effectively with other navies and with other nations to deal with the common challenge, and not just to free-ride on the efforts of others. And I think this is a very welcome development. We see that as we understand this is a common threat to commerce and to safe shipping; the fact that we have so many countries working together, countries which have not historically participated in these multilateral ventures, is a strong example of how China can play an important and contributory role.

On the military-to-military front, there, too, we see progress, although it’s not as sustained as we would like because we believe that it’s important that military-to-military cooperation be an all-weather effort. And even where we have difficulties, it’s important to sustain the dialogue between our militaries. But we have had some important exchange of high-level visits on the military side which we think are critical to building trust between the two nations.

On Iran, I think the strategy that President Obama and Secretary Clinton have led since the beginning of our Administration, which is to reach out to Iran and demonstrate our willingness to engage and to seek a diplomatic solution to our differences, particularly on the nuclear question, has proven successful if not in inducing Iran to agree to the steps that we think it needs to take, then at least to demonstrating that we are serious about looking for a diplomatic solution and that clearly putting the onus on Iran for the failure to make progress up to date.

And I think as a result of that, we are seeing unprecedented international cooperation in sending a clear message to Iran that its actions are not supported by the international community and that it needs to work effectively with us, or it will subject itself to significant new cost. We saw that last fall in the very important decisions taken by the IAEA Board of Governors in which we had the strong support of China and Russia. And now, as we move forward in the Security Council, following on the P-5+1 process in which Iran is dealing with China, Russia, and our European partners. And while we have not fully adjusted our positions in terms of what precisely the action the Security Council should take, we’ve seen, particularly since President Hu’s visit to Washington for the Nuclear Security Summit, a growing willingness of our partners in the Security Council to recognize that the time has come to take significant action.

I think it’s clear from both their statements and their engagement in New York that China understands that an Iran which is seeking to develop nuclear weapons is not in its interest and that there is a need for a clear international message to go with that. And we are working very hard to reach common ground in the coming days in the Security Council to send that clear message to Iran. The path to diplomacy remains open. We clearly believe that’s the best way forward. But Iran will come to understand that there is a strong consensus in the international community that what it is doing is dangerous and it needs to change course.

Similarly, with respect to North Korea, our willingness to both engage and to offer the prospect of engagement with North Korea, but also to make clear that we have very clear expectations of what that engagement needs to produce has helped to build a strong international consensus both in support of diplomacy, but also in support of effective international measures where North Korea has turned its back on diplomacy. And I think that has paid off very substantially in the common actions we took along with China and the other members of the Security Council in response to North Korea’s missile tests last year and its announced nuclear test last year which led to, I think, both swift and unprecedented degree of consensus among the remaining parties in the Six-Party Talks, and then at the Security Council, to move forward with new sanctions on North Korea which we believe are having a significant impact there.

We obviously face a very challenging situation with the sinking of the Cheonan and it really underscores the precariousness of the situation on the Korean Peninsula. And I think that we all recognize that we need a thorough and complete investigation. No one is trying to hasten unduly the conclusions on this, but we are determined to pursue this thoroughly and to follow the facts where they point. And this will, in turn, have an impact on how we proceed in dealing with the challenge of North Korea and its actions, not only the nuclear front but in other provocative measures that it takes.

And how we proceed is going to depend first on clarity on the cause of the sinking of the Cheonan, second a clear understanding by North Korea that it must live up to its international obligations on the nuclear weapons program, on abiding with UN Security Council resolutions, and more broadly ending its belligerent and threatening behavior towards its neighbors. Throughout this process, as I say, China has played an important and constructive role through the Six-Party Talks and in our engagements, both bilaterally and in New York. And now, we are engaged in an intensive discussion with all of the key partners in the region, including China, on how to deal with this latest incident. And we very much hope that during this recent visit of Kim Jong-il to China that they had an opportunity to share with them their concerns about North Korea’s behavior and to make clear that we are watching very closely to see how events unfold in connection with the Cheonan. So that’s the first basket on security.

The second basket that the Secretary identified was on clean energy and climate. I don’t think I need to tell this or any audience why it is that the United States and China have such a significant role to play in dealing with the challenge of energy and climate change. We are the two largest energy consumers, the two largest greenhouse gas emitters, and there is simply no imaginable solution to the problems either of long-term energy security or of dealing with the problems of greenhouse gases and climate without significant engagement and contribution by both the United States and China. And so it’s now up to us to be the vanguards as it were, to accelerate the transition to a low carbon economy if we have any hope to meet the globally agreed objectives for limiting the concentration of greenhouse gases in the atmosphere and the risk of increased global temperatures.

And I think the evidence here suggests – and I know a lot of people here at Brookings are spending time looking at this question – that we are seeing a real sea change in the way that China is approaching this question. From its historical position of really sort of suggesting that either it wasn’t a problem or if it wasn’t a problem, it was somebody else’s problem to deal with and, therefore, not a responsibility for China, or somehow something that could impede China’s economic development, we now are beginning to see a recognition that China recognizes in its own self interest the need to deal with the problem of greenhouse gas emissions.

And so we’ve seen in China’s national plan and its actions in Copenhagen that we are beginning to see China address what I think are the key challenges, which is to see China reduce its emissions below business-as-usual levels as it goes forward with its economic development and put it on a long-term path to meet the global needs for what climate scientists told us is a sustainable level of greenhouse gas emissions or concentrations in the atmosphere, and to improve transparency and accountability so that all of us can judge the extent to which the kinds of plans and commitments that China is making its own at national level or something that can be essentially validated and perceived by the international community as well as to play a constructive role in international negotiations.

And I think we saw in the final outcome in Copenhagen a clear recognition of China taking at least positive steps, if not complete steps, on each of those elements. We’ve heard a lot about the difficulties of those negotiations. For those of us who were involved in Kyoto, I think this should come as no surprise in that like many fine soufflés or meals, the test is not in how it looked while it was being made, but how it came out of the oven. And I think if you look at how Copenhagen finally ended, we saw some very significant steps forward. And notably, for the first time, all major economies including China – that’s particularly significant that China was part of this – making national commitments to curb emissions and to transparently report on their mitigation efforts, which is critical to giving credibility to these commitments.

And now, we need to all work together going forward to make the Copenhagen Accord operational with balanced commitments by all major economies. And that international engagement has been complemented by our bilateral work on energy and climate. We signed a memorandum of understanding to enhance cooperation on climate change, clean energy, and environment at the last Strategic and Economic Dialogue. When the President visited Beijing last November, we had adopted a package of measures including a new clean energy research center, an electrical vehicles initiative, and a renewable energy partnership. We also had agreed on a public-private energy cooperation program and cooperation on clean coal development – all very practical steps which can offer benefits to both countries and to our private sector partners who were part of these efforts.

So I think while we have a substantial way to go forward and we also have some things that we need to do at home, we’re very much committed, the President’s committed to that. I understand that we’re going to see some movement forward in the Senate as early as today on new efforts to move legislation forward in the United States. We understand we need to do our part, but it’s something that we can do hand-in-hand with China to meet this common and collective good of a clean and predictable environment.

So the third topic that the Secretary identified in her initial remarks was the challenge of the economic crisis and global growth. And I think here, again, we saw the potential of the partnership between the United States and China. This is not a G-2. We recognize that however important our two countries are to dealing with these challenges, that we need the cooperation of all the systemic international players, but without the United States and China playing constructive roles, that the prospects for dealing both with the short-term challenges of the recent economic crisis as well as the long-term challenge of sustainable global economic growth simply cannot be met.

And on this, I think both countries did step up and do their part. China was a key player in the international coordination of the financial crisis. As you will all recall, this was the occasion of the President’s first meeting with President Hu, was in London for the G-20 meeting. Both the United States and China adopted historically large stimulus packages to support both our national economic activity, but also part of the global economic strategy.

And now we need to turn to the elements that will make this recovery sustainable over the long term. And that, of course, requires China to recognize the need to shift to more consumption of service-based economy, that that’s in China’s interest as well as the overall interests of the global economy. And I think we see clearly some signs that the Chinese leadership understands that basic insight. We, on our part, recognize that we need to do our part for global sustainability including the need to reduce our long-term debt. And that, of course, connects to the question of domestic consumption in China and other emerging economies as we try to sustain a more balanced economic growth.

Clearly, one element of this that we’ve made clear, we believe, is the importance of China moving to a market-based exchange rate, and I think this is a principle that China has embraced and has been reiterated by President Hu and Prime Minister Wen. And we look forward to our continued discussions on this topic. It’s something that is not done as a favor to any one country, but is actually part of China’s own national interests. Its economic leaders recognize it needs to be done in a way that recognizes that these are changes that take place over time, but we need to move in the right direction if we’re going to give the global economy and global markets confidence that we’re going in the right direction. And moving towards market-based exchange rates is a win-win because all of the economies will be stronger; there will be stronger markets for our exports, but also a more sustained basis for China’s own economic industries if we have a balanced growth.

At the same time, we recognize that as countries like China and other emerging economies play a greater role in the global economy, that we need to have their significant participation in the global economic institutions. And so we’ve seen, as I said, the role of the emerging economies in the evolution of the G-20. We now have China with the third-largest share of voting rights in the World Bank. And we support giving China a greater role in the IMF. This gives China an opportunity to exercise leadership – and responsible leadership – in this long-term strategy to keep the engine of global growth going.

So all of these issues are very much on our agenda and they all demonstrate that on the key global issues of our time, that there has been significant progress and a real convergence, I think, at the highest levels on common and shared visions about where we want to go, as I said, even if we don’t entirely agree in every detail on the means. And this really underscores the importance of the Strategic and Economic Dialogue, building on our very successful first meeting here in Washington. And in this upcoming meeting, we will have even more senior leadership participation than we had here in Washington with 15 U.S. cabinet members and agency heads traveling to Beijing.

And we used this meeting both to deal with long-term challenges, but also, frankly, as an action-forcing event to help us move forward on some issues to kind of crystallize the attention of leadership and to get things sort of taken out of the bureaucratic level to the leadership decision level.

It’s also a great opportunity to sustain the dialogue between key decision makers and policymakers in both governments – for them to understand our thinking, for we to understand theirs as well, and hopefully to influence decision making there. And the ability to do this across a crosscutting set of issues that intersect between the strategic, political, economic, environmental, energy is a particularly important feature of these dialogues, to break down the stovepipes that exist in both of our bureaucracies and to think in a more systematic and integrated way.

The S&ED sets out an opportunity both to give long-term priorities for engagement, but also to have concrete tasks. So again, as with last year, the S&ED will have two core tracks. The economic track, where we’ll be focusing on economic growth, including the importance of sustaining employment here in the United States, building and strengthening exports and investment opportunities for American firms, as well as to encouraging China to move forward to contribute to global economic rebalancing.

On the strategic track, we have three pillars. One is the pillar of counterterrorism, energy security, and military-to-military ties. The second is the international regional security issues. In addition to the two that I talked about, Iran and North Korea, Afghanistan and Pakistan increasingly figures in our discussions where we also are having a very positive set of dialogues and working together on common objectives there, and a third track focusing on cooperation through multilateral institutions on issues like climate change, health and pandemic disease, and food security.

Now, needless to say, in every one of these dialogues, each side is free to raise the issues of our concern, and we will have an opportunity, as we always do, to make our points about issues that are important to the United States, including human rights and religious freedom, the need to protect intellectual property, our concerns about aspects of the military modernization in China, as well as the issue of the overall global economic balance and the role of exchange rates. We will undoubtedly discuss core issues like peace and security in the Taiwan Straits, and from our perspective, the need for China to have a deeper engagement with the Dalai Lama over Tibet within the framework of the one China policy that we have continued to reiterate.

On the economic and trade front, we will discuss our concerns about aspects of Chinese economic policies which we think have protectionist casts, particularly China’s effort to link government procurement with innovation policy in ways that could undermine market access to key sectors of the Chinese economy. As I said, this is an opportunity in both the formal and informal sessions for us to have sustained dialogue, to exchange views in a friendly but fulsome way about each side’s perspectives, which allows us to move forward and deal with these issues of strategic importance to both.

So on the whole, the balance sheet is a pretty positive one. We don’t want to in any way underestimate the fact that important difficulties remain. But on these great global challenges, I think the answers to most of the questions that Ken raised are that we are heading in a positive direction. For the most part, the nature of these problems are such that our interests are shared in terms of the fact that we sink or swim together on issues ranging from global economic growth to health to terrorism to proliferation to protecting the sea lanes and other challenges that are in our common interest.

But we need to make sure that as we continue our support for China’s growing role in the global economy and the world political structure, that China’s growth is a positive-sum contribution to the security and economic growth of the world, and that its growth and prosperity do not come at the expense of others and that it’s ready to play a constructive role in addressing these global concerns in security, economic, political, environmental, health issues.

I think that’s a challenge that can be met. It’s one that we’re certainly committed to try to work with China to achieve. And we are looking forward to this very sustained engagement we will have in Beijing just two weeks’ time.

So thanks for your attention, and I look forward to your questions. (Applause.)

QUESTION: Thank you. John San with CTI TV of Taiwan. Is the Secretary talking about the Taiwan Strait? How do you see President Ma’s recent remarks to the fact that in an interview with the CNN he said that we will never ask the United States to fight for Taiwan? Are you encouraged by his determination to defend Taiwan on Taiwan’s own strength or are you relieved that the United States will never be dragged into a potentially bloody war, or are you concerned that President Ma may be distancing Taiwan from the United States?

Thank you, sir.

DEPUTY SECRETARY STEINBERG: Well, I think we’re generally quite encouraged by the direction of cross-straits relations between Taiwan and the PRC. I think we have long believed that a strategy of engagement by the two sides to look for a peaceful resolution of the issues is critical to their common future. This is something that in the end we have always believed that this is something that is best resolved through dialogue, and that we’ve encouraged Beijing to make clear that it can respond to these efforts by the leadership in Taiwan to try to find common ground to build trust across the strait. The discussions on the Economic Cooperation Framework are particularly important.

And so that provides a foundation for the two sides really to deal with each other, because this is a situation where conflict is in nobody’s interest. And I think it’s not particularly useful to speculate what would happen in the event that conflict comes about. The goal is to try to avoid it, and that comes about by a commitment by both sides to look for a peaceful resolution of their differences that takes into account the interests and the wishes of parties on both sides of the strait.

QUESTION: Eric McVadon, the Institute for Foreign Policy Analysis. Jim, you mentioned sea lane security a number of times. It warmed the cockles of my heart.

DEPUTY SECRETARY STEINBERG: Always happy to hear it, Admiral.

QUESTION: With respect to maritime cooperation, it seems to me that there’s a window for things like humanitarian assistance and disaster relief exercises with the Chinese, and antipiracy, of course, expanding that, and that folds right into energy security.

But let me ask a question that I pose with respect to the global climate change issue with the first panel this morning: Are we’re seeing that the Chinese have increasing interest in building trust and confidence or rather in demonstrating that they’re already pretty confident?

DEPUTY SECRETARY STEINBERG: I think, as I alluded briefly here and in more detail in an earlier speech I gave, I think one of the great challenges that we face is how we understand and how we adapt to China’s growing military power. We understand and accept the fact that along with economic growth that countries tend to develop their defensive capabilities, and that’s something by itself which is not necessarily objectionable. But at the same time, because China’s approach lacks the kind of transparency that we’d like, we do have questions about the long-term intentions, and that’s why we want to strengthen the opportunity for military-to-military exchanges and dialogues so that we have a better understanding of China’s goals, plans, and intentions and what’s driving its decisions over military modernization, not just in terms of equipment but also in terms of doctrine and its operations, to give us the assurance that what it is seeking to achieve is consistent with the security and broader security, political, and economic interests of others.

So to the extent that China has a greater naval and maritime capability to contribute, as you say, to counter-piracy and to humanitarian efforts, that’s clearly welcome. And the capacity to go further out and yet to contribute to those things is a contributor to global well-being and global security. But because there are other aspects of their modernization program, particularly in the maritime field, that are less clear, we would like to get greater clarity about what their goals and intentions are and to build the kind of trust between our militaries and our leaders that let us understand what that is about.

I think we hope to persuade the Chinese that the world we live in requires more cooperation not competition, and that neither side will benefit from a military competition between the United States and China or between China and any of its other neighbors. This is a situation where we’ve learned from long experience that the risks associated with those kinds of competition are severe and that nobody wins in the long term.

So I think that’s why dialogue is so critical in this sphere and why we’ve tried to persuade our Chinese counterparts to try to insulate that dialogue from our disagreements on substantive issues so that we don’t lose the opportunity to discuss areas where we have concerns, as well as where we have obvious common interests.

QUESTION: Thanks, Ken. Thanks, Jim, great talk.

On the – I’m sorry, Chris Nelson, Nelson Report. On the recently completed North Korea meeting, are you getting a sense that the Chinese are getting a little bit closer to seeing the U.S. argument that North Korea, as it is, is a strategic threat to China, or are they still trying to keep it going to somehow? And in that regard, as the Cheonan incident shows, regardless of who’s judged to be at fault ultimately, it does seem to have started a more considered discussion of the level of U.S.-South Korean military intelligence sharing, perhaps enlarged BMD, all that sort of thing.

Do you think it’s correct to be thinking about an enhanced U.S. relationship with South Korea in the military and strategic sphere, leveraging that on Chinese progress in seeing our point of view on North Korea? Or is that – am I mixing apples and oranges, going too far with that?

Thanks.

DEPUTY SECRETARY STEINBERG: No problem. Let me kind of being with a few general observations. I think, first, I think I’ll let the Chinese speak for themselves in terms of their own assessment of the situation in North Korea and I’m sure they’ll have some things to say about that. But I would say, first, that there is a strong understanding that stability in the region is in the interest of all of the neighbors, and that’s a common interest; and that aspects of North Korea’s behavior, particularly their nuclear activities, is a threat to that stability; and that we have a common interest that binds the other five parties in the Six-Party Talks together to address that, as well as other risks of instability coming out of North Korea.

And those are the subject of intense consultations both bilaterally and multilaterally among all of the various combinations and permutations in twos, threes, fours, and otherwise of the parties in the region. I think no country can feel entirely at ease with the situation in North Korea right now. We are looking for ways to work together to try to address that in ways that enhances the common security of all of North Korea’s neighbors.

I think in terms of our engagement with South Korea, it’s hard to imagine a much more enhanced capacity than the unique relationship that we have with South Korea, both on a political and a security level. I mean, the Combined Command is an almost unique example of two militaries that are deeply, deeply intertwined in dealing with the security challenges of the Korean Peninsula, and we work together in a remarkably united way together as two militaries to address those challenges.

So whether we need to make specific adjustments in our posture or operations is something I’m sure we’ll all take a look at. But in the terms of the need to get closer, it’s just hard to imagine. And that extends not only to the operational day-to-day of the two militaries, but I think on the political level, beginning with our two presidents, I think the level of cooperation and consultation between the United States and the Republic of Korea now is unprecedented in my experience, which now isn’t as long as Jack Pritchard’s, but it goes back a ways.

And I am really very encouraged and heartened by the degree to which we are working so closely together on a full range of issues, not just on the issues of stability on the Korean Peninsula but the strong contribution that South Korea’s making to our efforts in Afghanistan, its global commitment on piracy, and other issues. It really is a remarkably strong and important bilateral relationship, and so that’s why we’re working so closely together on the investigation of the Cheonan. It’s why we are consulting closely on all aspects of the challenges on the Peninsula, and I’m confident that that close collaboration will continue as we move forward.

QUESTION: Hi, Foster Klug with the Associated Press. You seem to be willing in your speech to link the Cheonan incident to the future of nuclear talks. Is there any other guidance you can give on what else the U.S. is prepared to do if, as appears will happen, there’s some sort of linkage to North Korea with this attack?

DEPUTY SECRETARY STEINBERG: I’m going to resist all of those "ifs" in your question. We have made no conclusions. We are continuing the investigation. We will do this thoroughly, objectively, and in close cooperation, not just with the South Koreans but this is actually a multinational effort with Australia, Norway, and others who are involved in this. So I think it’s been very important that it is a broad-based and very objective assessment. And I don’t propose to speculate on how this will turn out, because we don’t know yet and we really want the facts to lead us. But at the same time, we will follow the facts where they go and we’ll draw the conclusions from the facts.

But I do mean to say that we can’t be indifferent to this event. This was a deep tragedy for South Korea, and the people of South Korea are entitled to as full an explanation as possible as to what caused it. And we will work with them to do that. And until we have clarity about this, I think it’s important for us to be careful about how we move forward, leaving open any of the possibilities and without prejudging what the possibilities of this investigation are. But I think right now is a time to be prudent in terms of our actions going forward, and we’ve encouraged all sides to be prudent in every respect until we know what the results of those investigations are.

PARTICIPANT: Let me say, it’s a very serious issue. I was smiling as Jim was answering this only because I was recalling back when I joined the National Security Council, Jim sitting down with me and explaining to me that, as an academic, I probably liked to deal with hypothetical questions, but as a member of the Administration, never answer – never ever answer a hypothetical question from a member of the media. So it’s a pleasure to watch you. (Laughter.)

QUESTION: (Inaudible.) Deputy Secretary, China just announced last month that it wanted to supply two new nuclear reactors to Pakistan under an agreement which is probably not grandfathered by their NSG entry. How do you look at it and what are the conversations that you have with the Chinese on this subject?

DEPUTY SECRETARY STEINBERG: Well, I think as you suggested from your question, I think the question is: What is the status of this assistance and how does it fit into understandings with the IAEA? And I think this is something that is still under discussion among all of us. Obviously, it’s important from our perspective that all countries live up to their commitments. As you say, the Chinese have argued that it’s grandfathered. This is something that we haven’t, I think, reached the final conclusion on, but it’s something we’re obviously looking at very carefully. But I think it’s important to scrupulously honor these nonproliferation commitments, so we’ll want to continue to engage on the question about whether this is permitted under the understandings of the IAEA.

QUESTION: Thanks. (Inaudible) from National Defense University INSS. I just hope you could expand a bit on your comments on U.S.-China security dialogue on Afghanistan and Pakistan, where you said – sorry – you noted that there was – that it increasingly figures into the security dialogue and that that dialogue has been constructive. And I didn’t quite hear whether you’d said the dialogue was on common objectives or interests. And I wonder if there is, in fact, a meaningful distinction. And then just expand to dig a little deeper, is Chinese investment or commercial activity consistent with U.S. objectives in Afghanistan and/or Pakistan? And is it – or is it insufficient without greater coordination on political and security affairs?

DEPUTY SECRETARY STEINBERG: Well, we have, as I said, had an intensified conversation with China on these issues. Ambassador Holbrooke has been to Beijing several times. We’ve had conversations both in Beijing, elsewhere. The Chinese have participated in a number of the multilateral meetings involving Afghanistan.

And I think our objectives are largely coincident in Afghanistan. I think we all seek a stable Afghanistan that has an inclusive government, that’s responsive to its people, and in particular concern to both of us that it does not harbor violent extremists that can pose a threat to the United States, to Afghanistan’s neighbors, and the international community as a whole.

So I think the basic framework within which we approach these things does have a shared set of interests. We welcome Chinese economic investment in Afghanistan. Clearly, creating jobs and economic opportunity is part of the long-term strategy for creating a stable Pakistan, creating alternatives to illicit production of narcotics and other sources of income for the Afghan people. So investment is important. And as long as that investment is transparent and meets generally accepted international standards to the extent that it involves assistance, we welcome it. And it’s something we’ve had a dialogue with the Chinese about, but it’s largely a positive one.

Similarly, with respect to Pakistan, we think that China can play an important role in helping strengthen the capacity of the Pakistan Government to meet the needs of its people and to provide an alternative to the extremism which threatens the Pakistani state as well as the rest of us.

So I think in the main, our interests and objectives are common. They’re never identical in any case, but it’s important that all the neighbors who have a big stake in a stable and non-threatening Afghanistan work together. And we’ve been encouraged by China’s growing willingness to be part of that effort.

QUESTION: Mr. Secretary, Gary Mitchell from the Mitchell Report. Earlier today, we heard a very thoughtful panel talking about clean energy, environment, et cetera, and there was an interesting sort of factoid that came out of that about what happened at the tail end of the conversation between President Obama and his Chinese counterpart in Copenhagen that reflected a – what I think is fair to say is a significant difference within the China policy elite on questions related to clean energy and climate, which leads me to ask a question that has three component parts but they all should run together.

One is, are you seeing that kind of dissention on the other two components that you identified in Secretary Clinton’s speech – security and global financial crisis – are you seeing that kind of division or dissention, however you might describe it?

Second, is it growing or is it static?

And third, to the extent that it could be done, is there a way to characterize what the nature of political differences of opinion in China are like in the way that it would be easier to do, for example, in this country to talk about right versus left and Tea Party, et cetera?

DEPUTY SECRETARY STEINBERG: I don’t know whether there’s a Chinese equivalent of Tea Party, but I’m not going to go there. (Laughter.) Yeah, a lot of good tea.

I think the climate and energy issues, because they are so deeply caught up in economic issues, obviously have different impacts on different sectors of society and different sectors are impacted to a different degree by climate change and climate disruption, and the cost of adaptation and the cost of mitigation fall on different sectors. And that’s true in any society. And so I’m confident that there’s as lively a debate in China among the various stakeholders about these issues as there is in the United States.

But it’s the role of leadership to provide an overarching framework and to figure out where the national interest lies, and I think one of the positive signs that we’ve seen is that there seems to be a growing recognition at the most senior leadership in China that when you put it all together, that China’s future depends on China taking significant measures to address this challenge. There are lots of reasons why it’s in China’s interest and there are probably lots of internal political reasons why the Chinese leadership is moving in that direction. And I’ll leave it to Cheng Li and others to explicate their thoughts on this.

But I think it is significant that as they think about the sort of contending voices and perspectives within China that there is, it seems to me, a growing rate among the leadership to recognize that China needs to get out in front of this. It’s in China’s interest on economic grounds because it needs to adapt for the future and have an economy that will reflect what is the inevitable transition to a low-carbon economy. I’m confident of that and I think the Chinese leadership recognizes that China could benefit from being part of the solution rather than part of the problem.

I think it’s important to remember on so many of these issues that the effort to deal with carbon emissions and greenhouse gasses is deeply tied up with more localized forms of environmental damage in China, which also gives the Chinese a strong incentive. We’re talking about black carbon, we’re talking about particulates, lots of other aspects of the costs of environment, just as in our country the leading edge was clean air, clean water, and more localized environmental issues that come together and gives them a strong natural constituency. As China’s own economic well-being advances, its people increasingly are tired of polluted air, polluted water, and the like. And so these converge around issues and also a recognition that there’s a cost to China from being seen in the international community as not helping to contribute to the solution. And I do think that was an important part of what took place in Copenhagen was a recognition that China will be viewed in the court of global public opinion, just as we will, if we don’t meet our responsibilities.

So whatever the containing forces are, I think what we are seeing is that whosever is summing them up at the senior leaderships there seems to be willing to move forward, not as much as some would like to see, but at least in the right direction on these issues.

QUESTION: Hi. Scott Ottoman with Inside U.S. China Trade. At the end of President Obama’s visit to China last year, as part of the communiqué there was a mutual commitment by both sides to accelerate bilateral investment treaty talks. Since that time, the United States has been engaged in a review of its own bilateral investment treaty model. It was supposed to have initially, reportedly, come out at the end of last year. You’re still working on it. I wonder if you could give us a status report, if there’s likely to be any further acceleration of the talks with China, which are stuck at a technical level.

DEPUTY SECRETARY STEINBERG: We’re still working on it. (Laughter.)

QUESTION: How about then in terms of your talks on indigenous innovation with the Chinese that you mentioned you would speak about at the first S&ED?

DEPUTY SECRETARY STEINBERG: Yeah. No, this is obviously of considerable concern to us and we think it obviously has a huge impact on the United States and our firms and our investment in China. And we think in the long term, it’s counterproductive to China’s own interest. I think long history shows that this kind of (inaudible) industry protectionism or these kinds of tools, in the long run, tend to distort even the country whose nominally trying to promote its own interest. So we think that China’s own long-term interest would benefit from a free and open playing field that allows global firms, including U.S. firms, to come and compete on an even basis. It is the core principles behind the WTO. Clearly, we would like to see China extend that into the procurement field.

And I think I’ll leave it to Secretary Geithner to elaborate as he gets into his discussions in Beijing, but I think that the Chinese certainly understand our concerns and we hope that they will be responsive because we think that in the long term the system that China will want to belong to is one that promotes a true level playing field in China that will bring world-class investment to China by firms from around the world.

QUESTION: Mr. Secretary, Scott Herald of the Rand Corporation. Thank you for your remarks today and your service to our country. In interviews in Beijing across the last two weeks, as well as in Shanghai, the subject of S&ED came up quite frequently. It was always highly praised and almost always immediately followed with: We need this from our side, the Chinese side, as an opening for our top leaders to give the room for policy innovation and relationships to be built at the working level.

However, the follow-up would go: We would then like a secondary track, 1.5 or track 2, where our working-level officials could talk with your working-level officials to build the kind of ideas that can push up into that space that’s been opened up.

Without wanting to put you on the spot, sir, I wonder if this is something that the U.S. side would welcome, has thought about, or would be open to if the Chinese side were to propose it or if we were to propose it to them.

DEPUTY SECRETARY STEINBERG: Yeah. I mean, I would say first we would welcome it, and I think we kind of think we are doing some of that. I wouldn't call it a track 1.5. It’s the intercessional work that takes place between the kind of the big high-level plenaries. But we’ve all recognized that for these things to be effective, we have to do the work in between the formal sessions of the S&ED. And I know many of my colleagues who are working on these individual issues would say that that’s exactly what they’re engaged in. We probably do need to do more. Certainly, I know that in at least one of the meetings between the Secretary and State Councilor Dai, we explicitly talked about the need to strengthen these ongoing mechanisms so that these aren’t just episodic engagements but really do produce sustained work. So I think it’s something that we feel we’re doing some of now. We clearly could do more and would welcome the opportunity to engage on a more systematic basis.

QUESTION: Thank you so much. I’m Teuan He, a correspondent from South Korean newspaper (inaudible) Ilbo. I’m trying not to use the term "if," but – (laughter) – (inaudible) the question. Once the final investigation report by South Korean Government about (inaudible) finalized, can the schedule, the transfer of 2012 (inaudible) can be rearranged, in your opinion?

DEPUTY SECRETARY STEINBERG: The only thing I want to say on that issue is that I don’t see any linkage between the two issues. I think that we’ve had a long discussion and we will continue to have a discussion about the command relationships on the Korean Peninsula. But I would not see that whatever discussions we have or don’t have on that topic would be influenced by this particular incident, however it comes out. We want to make sure that whatever command relations we have serve the interests of our two countries and promotes stability on the Korean Peninsula.

MODERATOR: Jim, thank you very much for coming over here and giving this masterful overview. (Applause.)